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Pedigree Portfolio

The First Hawaiian Tower on Bishop Street is home to a newly assembled team of world-class investment brokers

April, 2003

When the University of Hawaii floated $150 million in bonds to fund the new medical school campus, the school sought advice from some of the top financial institutions around the country on how to manage and maximize its cash flow during the project. The dust settled after a spirited bidding process and a local institution, First Hawaiian Bank, emerged as the victor.

It was a big endorsement for a new team of investment gunslingers recruited by FHB’s top tandem, Don Horner, president and chief operating officer; and Walter Dods Jr., chief executive officer. The new team, Bishop Street Capital Management Group, is expected to grab a bigger share of the money-management pie in Hawaii. “I think it’s a common trend across the industry, as banks try to generate more free income and broaden out their services,’” says Joseph Morford, managing director for RBC Capital Markets. “Certainly, experience and capabilities can help jumpstart First Hawaiian’s efforts to penetrate the market.”

In the past, local institutions did not have the institutional savvy to compete with U.S. Mainland giants for sophisticated investment advice. That’s no longer true.

The bank that says ‘oui’ has quietly retooled a capital-management squad that will play for big money, not only here in Hawaii, but on the Mainland, as well. It’s a juicy target. Banks can earn fat margins by taking a percentage of assets under management, a business with far higher returns than, say, the traditional loans and deposits.

Under the guidance of Gregory Ratté, senior vice president and chief investment officer, the Bishop Street Capital Management Group has opened a four-person San Francisco office in an aggressive expansion plan. All told, BSCM has expanded from four to 12 investment professionals, giving First Hawaiian a first-class investment research arm. No doubt, the new hires come with high-powered pedigrees.

Kenneth Miller, senior analyst, came from JP Morgan H&Q, where he was twice named to theWall Street JournalAll-Star analyst team. M’Liss Hualani Moore moved over from Kamehameha Schools, where she was associate director of private and public assets, co-managing a $2 billion portfolio. Matthew Walton, BSCM’s director of fixed income strategies, is from bond giant Wachovia Securities, where he served as senior vice president.

Ratté is no slouch, either. Before joining FHB in the fall of 2000, he served as chief investment officer, overseeing $7 billion in assets at Brundage, Story & Rose, a boutique Wall Street investment firm. He also was deputy chief investment officer of the $32 billion in assets Bessemer Trust. Ratté says the hiring process at BSCM was tricky, because he sought high-caliber individuals would stay for the duration, due to their local ties. “Hawaii is a long way from a lot of places. It took a lot of hard work and time, but we made sure to find individuals who are already well established in their careers,” Ratté says.

Evidently, the move is already paying off. Ratté says BSCM has added $330 million in assets under management, since the expansion began officially in January 2002. That included: $25 million in East Coast money, which followed Ratté to FHB; and $100 million in assets from high-net-worth individuals. The bank added the latter when it cherry-picked a group of private client investment specialists from the San Francisco office of J.P. Morgan.

Ultimately, Ratté wants to stop the outflow of money from Hawaii to Mainland investment managers and keep those management fees here in the Islands. “A lot of Hawaii’s wealth is exported,” he says. “If we can keep the capital managed in Hawaii, it’s a great feedback loop, because this is a knowledge business, and if it grows it will bring in even more smart people,” he says.